The Medicare Discount Drug Cards: One Month In

Just over a month
since its commencement, the Medicare Discount Drug Card program is
already showing significant promise in lowering prescription drug
costs for seniors.

Savings Estimates Continue to
Mount

A score of studies
using data from the Medicare Discount Drug Card (MDDC) drug price
database demonstrate that the program is capable of achieving its
primary goal: reducing the cost of prescription drugs for seniors,
especially low-income seniors.

A study by the
Centers for Medicare and Medicaid Services (CMS) finds potential
savings of 32 to 85 percent for low-income seniors who enroll in
the MDDC and thereby receive $600 transitional assistance.[1] Low-income
beneficiaries stand to save the most. CMS makes the important point
that "Beneficiaries-especially low-income beneficiaries-are
forgoing substantial savings by not enrolling in any of these cards
now."[2]

Preliminary
results from a study being conducted by the Lewin Group for the
Healthcare Leadership Council show that seniors save, on average,
just above 20 percent with the MDDC.[3] The study also finds
that seniors who qualify for the transitional assistance could
realize savings between 29 and 92 percent.[4]

The American
Enterprise Institute (AEI) recently published an extensive report
on the MDDC. The report shows how the cards would bring low-income
seniors savings of between 53 and 78 percent and that even
moderate- and high-income seniors would enjoy significant savings
with the cards.[5]

The AEI study
takes into account a recent development that others overlook.
Several drug manufacturers, in conjunction with certain discount
cards, offer their drugs at greatly reduced prices ($12-$15 for a
30 day supply) to low-income beneficiaries who have spent their
$600 transitional assistance. This additional discount will
increase low-income seniors' savings, perhaps significantly.

Competition Continues to Lower
Prices

Evidence continues
to mount that competition between Medicare Discount Drug Card
providers is driving down the prices of seniors' prescription
drugs.

At the request of
Congressman Henry Waxman (D-CA), the minority staff of the
Committee on Government Reform studied how drug prices have changed
since the drug card program's inception. Specifically, Waxman
wanted to see how far, if at all, the prices of the least expensive
prescription drugs have fallen. The results are telling.

Per Waxman's
request, Committee staff chose ten drugs that are popular among
seniors and compared the lowest available prices for those drugs at
the inception of the program on May 3, 2004, to the lowest
available prices on June 1, 2004, when the discount cards became
valid.[6] The staff found that
the total price for monthly supplies of all 10 drugs had fallen by
only $4.75[7],
but that is only half the story.

Of the ten drugs
originally chosen for Waxman's study, eight decreased in price and
two rose.[8]
Merely adding up these changes, one does arrive at the $4.75
number. But this methodology does not present a real-world picture
of price movements under the program. Three of the drugs included
in the Waxman study- Nexium, Prevacid, and Protonix-all treat the
same condition, acid reflux. Two of those drugs- Nexium and
Protonix-are the two, of the ten altogether, that rose in price.
Remove these two drugs from the bundle-since it is highly unlikely
any senior would be prescribed all three-and the remaining eight
decreased in price by $30.47 for a one-month supply, far more than
the $4.75 Waxman highlights. While not monumental, $30.47 would be
welcome savings for many seniors living on fixed incomes. Also,
factor in that these savings are monthly: a senior requiring this
particular bundle of prescriptions stands to save $365.64 more with
the MDDC than just one month earlier.[9]

Replacing just one
or two of these brand-name drugs with generics would only increase
the savings. In a study predating the MDDC program by a month-it
therefore does not include MDDC discounts-the FDA found that "costs per day can fall by 14 to16 percent if
patients use generics instead of branded drugs, depending on their
medical needs."[10]

"Too Much Choice"

At a recent Senate
Finance Committee hearing on the MDDC, several senators complained
that the card program is too confusing because there are too many
cards. They assert that seniors face too many options and will
simply not enroll in the MDDC.[11] Said Senator Max
Baucus (D-MT), "The sheer number of discount cards has made the
enrollment process daunting, confusing, and downright unattractive
to many beneficiaries."[12]

In response to
these concerns, Senator Kent Conrad (D-ND) introduced a bill to
limit the number of cards in the program to three per region.
Currently, there are 72 cards available, 39 of which are national
and 33 regional. Conrad's Discount Drug Card Simplification Act, in
addition to limiting the number of cards available, would also
disallow price increases. Card vendors would have to maintain
prices at the levels set on December 31, 2004, and would be
forbidden from changing which drugs are covered by their cards.
According to Conrad's office, this is "a measure that would serve
to spur competition among companies offering discount cards."[13]

For two major
reasons, though, limiting the number of cards available and
restricting card vendors' pricing flexibility would be a step
backwards for seniors.

First, having
several dozen cards from which to choose allows every senior to
find the one that best suits his or her needs. Seniors can
choose a card that offers low prices on their prescription drugs
and that makes those drugs available in the most convenient
fashion-whether from a trusted pharmacist, through a local drug
store chain, or by mail order. While mail order often provides the
lowest prices, many seniors prefer to visit a pharmacist whom they
have known for years and others visit a pharmacist to ask questions
or to receive their prescriptions as quickly as possible. Limiting
the number of cards that can participate in the MDDC program would
necessarily limit the variety of ways seniors can obtain their
prescription drugs. If the three cards chosen for a given region
offered only mail-order service, for example, seniors would be
forced to choose between the cards' savings and personal, sometimes
crucial pharmacist care.

Second,
blocking the ability of prices to fluctuate with market forces
would bring a quick end to the MDDC program. While the prices
of most drugs available through the MDDC have decreased since the
start of the program, some prices have increased, for any number of
reasons. If card providers were unable to adjust their prices or
drop drugs from coverage, they would face the risk of being
required, by law, to lose money on the sale of drugs that have
become more expensive. Card providers may be loathe,
understandably, to take on this risk, or they may be willing to
bear it only by charging higher prices across the board. Either
way, seniors' savings would be sacrificed.

Senior Interest Groups Unite

More that 80
organizations, many of which opposed the passage of last year's
Medicare bill, are actively promoting enrollment in the MDDC
program. The Access to Benefits Coalition (ABC) consists of members
as diverse as the American Association of Retired Persons (AARP),
the National Urban League, the Salvation Army, the Meals on Wheels
Association of America, and Easter Seals.[14] This coalition is
dedicated to making sure that eligible seniors "know about and can
make the best use of both public and private prescription drug
savings programs."[15]
ABC has set a goal to enroll as many as 5.5 million low-income
Medicare recipients in the MDDC program.[16] Thus far, 3.5 million
seniors have enrolled in an MDDC.[17] In addition, ABC has
set out to coordinate other programs, both at the state level and
through drug manufacturers, to ensure that needy seniors receive
all the help for which they quality.

Conclusion

Though the Medicare Prescription Drug
Discount Card program is just over one month old, study after study
shows that it will significantly help seniors who would otherwise
struggle to pay for prescription drugs. And while seniors of all
income levels will enjoy savings, those most in need, low-income
seniors without prescriptions drug coverage, will enjoy the
greatest savings.

Though enrollment has been slow in the
program's infancy, the help of community and senior organizations,
such as the members of the Access to Benefits Coalition, and word
of mouth-especially as seniors become better educated about the
savings the drug cards offer-will likely bolster interest and
numbers in the months ahead.

Derek Hunter is a Research Assistant in
the Center for Health Policy Studies at The Heritage
Foundation.

[9] There is another
duplication of medicines in this "basket." Both Lipitor and Zocor
are used to treat high cholesterol and one person is unlikely to be
prescribed both. The lowest price available for Lipitor fell $2.23,
and Zocor $6.65.

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